Tuesday, August 4, 2009

Save more, spend less....

The U. S. economy is still not great and I don't expect it to get a lot better.

That's because of the simple fact that most Americans and their governments won't live within their means.

It's like a huge pyramid scheme, being artificially upheld. You can't spend more than you have and not expect some reckoning to come calling eventually.

It is NOT that Americans need to spend more, they need to SAVE MORE money period. That's the only long-term solution out there.

I'm in a lucky minority that I live within my means. I currently have zero debt. I probably can't maintain that forever, but I try.

I see some specific problems with the current spending habits of Americans. Here are 10 of them, not in any particular order:

1.     --The younger generation has some kind of "entitlement mentality." They generally want everything out there and aren't willing to save up/wait to get it. They just feel they deserve it.

2.    -- All the electronic gadgets out there are partially to blame. People think they have to have the latest TV, computer, cell phone, you name it. I've seen homeless people who still somehow have a cell phone. If you afford it fine, but a 2007 model cell phone is OK until you can pay at least mostly cash for the 2009 version, or latest model.

3.     --Credit is too readily available these days. People are led to believe debt is OK and even preferred.

4.     --Some people have simply purchased too large of homes. A huge home may be the greatest status symbol, but I'd rather have my paid off, modest, middle class home, rather than have a larger, newer home in a richer neighborhood -- if it means having an unrealistic  mortgage payment.

Having a large- than- you-need-home isn't just about a bigger mortgage. There are higher utilities, property taxes, furnishings costs, etc. too.

I personally believe couples should purchase a home with the idea that one household income is soon going to pay ALL of that basic payment. Buying a home and relying on two incomes indefinitely to pay the mortgage is a risky plan,  especially in today's topsy-turvy economy.

--If you have to move because of a job relocation, fine. But too many Americans are caught up in the "move up" mode. They should lay down roots in one neighborhood and mostly pay or pay off all that home before moving on.

6.     --Teens and young adults spend too much money for that of little worth. Tattoos are everywhere these days. I heard one young woman on the bus proclaim that she just had to have this certain $1,000 tatoo.

Too many young men have to jack up their trucks or jeeps. The cost for that is $2,000 plus. What is this for? For most it is simply for the cool look. What a waste. (However, this lift kit stuff also compromises the vehicle's braking and steering, causing safety concerns. Some have also illegally jacked up their vehicles too far, or have added oversize tires too, though they seem to never to be cited for such violations.)

7.     --Student Loans: Some think that is what they are supposed to do. I don't agree and believe student loans should only be taken out for graduate programs. Miss a semester to save money, but don't rack up that debt, if possible, even though this is for a good cause.

8.     --Many people don't seem to think through the total effects of their purchases. Buy a boat, for example, and you need a place to store it. Buy an RV and you need room too. That can mean extra cement or gravel pads and additional taxes.

9.     --Monitor your leisure time spendings! To many people use credit cards to eat out or to go to movies. That's a risky practice.

10. --Save money. Americans need to save more. I know if they follow the federal government's example, that won't happen, but this U.S. economy is doomed because you can't keep going in the red forever.

Department stores only thrive on excessive consumer spending and as such, America has really dug itself into a hole, especially since less spending at stores means less sales tax revenue for cities. It is a vicious circle.

BOTTOM LINE: The current U.S. economy is a long term impossibility and something as bad or worse than the 1929 great depression is sadly still coming.
In fact, until the high number of "quick loan" outlets in the U.S. dwindle, there's likely to be no real improvement in the U.S. economy. All those loan places are simply a sympton of a bigger problem.



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